New Zealand has a new stock exchange – designed specifically for small and medium-sized businesses (SMEs) to raise up to
$20 million a year from the public.
Called Catalist, the exchange has already been successfully working the private investment sector.
But now it has been given a licence to open a public market, from June 21, for businesses too small to list on the NZX.
Catalist’s public market targets SME listings with an initial value of between $6 million and $60 million – considerably
lower than what would be expected for a traditional stock market listing.
Colin Magee, Catalist’s CEO, says the green light to start trading with retail investors came after the Financial Markets Conduct (Catalist Public Market) Regulations 2021 were passed late last month.
Catalist has worked on the licence and legislation with the Ministry of Business and Innovation (MBIE) and the Financial
Markets Authority (FMA) over the past two years to simplify the public listing process, creating a considerably lighter
regulatory environment.
Magee, says Catalist couldn’t come at a better time for New Zealand SMEs, as they’re presented with a post-Covid window
of opportunity.
“SMEs make up a majority of New Zealand businesses, so there’s a real need for those with growth potential to have
better access to capital, and equally for investors to have better access to SME investments, to increase economic
growth and job creation,” he says.
“Catalist’s public market means smaller businesses can now access public investment, with significantly lessened costs
and administrative burdens – and without compromising investor protections.
“We’re already working through the listing process with a number of businesses - and investors can sign up for an
account on our website, so they can trade when there’s an auction running.”
Differing from a traditional stock exchange, Catalist uses regular auctions, rather than continuous trading, allowing
for fairer pricing and increased liquidity for financial products that don’t trade very frequently – often the case with
smaller businesses.
Regular auctions also allow for alternative disclosure provisions, a key difference with Catalist’s new market, where
businesses only disclose information for each auction, rather than continuously.
“Traditional stock markets don’t work for SMEs because the costs, time spent on compliance, continuous disclosure
obligations and focus on short-term share price get in the way of day-to-day operations and focusing on the long-term
health of the business,” Magee says.
“In the past, we’ve seen growth markets, such as NZX’s ‘NXT’ take a traditional continuous trading approach and fail to
meet the needs of SMEs. We’ve taken the learning from that and use periodic trading and disclosure instead, which has
proved successful in other jurisdictions.
“Investors can now access well-regulated investment opportunities in SMEs, where they can be confident in the standard
of information they receive.”
Designed as a ‘steppingstone market’, when businesses reach an appropriate size, Catalist will then assist them in
transitioning to a more traditional stock exchange, such as the NZX.Notes to Editors:Catalist is now the only licensed stock exchange in New Zealand, besides the NZX.Catalist will be regulated by the FMA.The Catalist Public Market Issuer Rules can be accessed here.Catalist previously went under the name, MyCap Markets, which was mentioned in the Capital Markets 2029 Report and Chapman Tripp’s New Zealand Equity Capital Markets Report.For more information, have a read of the benefits of a licensed stock exchange and why periodic auctions are better suited to smaller businesses.